Industry - Union Budget · 2011. 6. 21. · Industry 209 0 Mining Per cent Growth (per cent) in the IIP and its major components 5 10 15 20 Growth in Apr-Nov 08-5 Figure 9.1 25 Growth

Industry

Industry, especially manufacturing, was one of the key drivers of the transformationin the growth trajectory of the Indian economy witnessed during the post-2000 period.However, a cyclical slowdown began in the industrial sector in 2007-08 and wascompounded by the twin global shocks in 2008-09. The effects lingered on briefly inthe current fiscal, but growth rebound is now amply evident. Gross domestic product(GDP) growth has clearly revived in the second quarter of the current year and theindustrial sector has emerged as one of the prime movers of the process.

9.2 The recovery in the industrial sector is clearlydiscernible as corroborated by both the data onnational accounts and the index of industrialproduction (IIP). The downward trend observed inthe rate of growth of the IIP that spanned almosteight quarters (beginning the first quarter of 2007-08 and continuing through to the last quarter of 2008-09) stands reversed as gleaned from the latest data

for the current fiscal. After reaching a trough of 0.6per cent during the second half of 2008-09, growthin the IIP revived to a level of 7.7 per cent duringApril-November 2009-10.

9.3 The broad-based nature of the recovery wasevident in the pick-up in growth of almost all majorcomponents of the IIP (Table 9.1). With the exception

CHAPTER

9

Table 9.1 : Growth in the IIP and its major components

(per cent)Period Mining Manufacturing Electricity IIP

2006-07 5.4 12.5 7.2 11.6Q1 2007-08 2.7 11.1 8.3 10.3Q2 2007-08 7.4 8.9 7.1 8.7Q3 2007-08 5.5 8.9 4.6 8.3Q4 2007-08 5.2 7.3 5.5 7.0Q1 2008-09 4.0 5.8 2.0 5.3Q2 2008-09 3.8 4.9 3.2 4.7Q3 2008-09 2.0 0.5 2.9 0.8Q4 2008-09 0.9 0.3 3.0 0.5Q1 2009-10 6.8 3.4 6.0 3.8Q2 2009-10 9.0 9.3 7.5 9.1Oct-Nov. 09 9.5 11.9 4.0 11.0

Source : Central Statistical Organisation (CSO).

209Industry

0

Mining

Per

cent

Growth (per cent) in the IIP and its major components

5

10

15

20 Growth inApr-Nov 08

-5

Figure 9.1

25

Growth inApr-Nov 09

3.4 4.2 2.8 3.6

8.4

-0.7

5.17.3

4.1

8.3 7.76.1 6.1

7.0

11.4

1.1

7.6

21.7

ManufacturingElectricity

Basic goodsCapital goods

IntermediatesDurables

Non-durablesIIP

of consumer non-durables, while all the use-basedindustrial groups subsumed under the IIP haverecovered from slump, it was the consistentlyincreasing growth in consumer durables andintermediate goods that drove the industrial revival(Figure 9.1).

9.4 The continuing downward movement in capitalgoods and consumer non-durables, and to an extentbasic goods, suggests that their current rate ofgrowth is significantly below the pre-2007-08 levelsand that fuller recovery requires a broader anchor(Figure 9.2).

Per

cent

Year

Growth in IIP and its use-based categories (in per cent): Basic goods

0

2

4

6

8

10

12

Figure 9.2A

Growth inbasicgoods

Trend line

2006-07 2007-08 2008-09 2009-10

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Oct-

Nov

Per

cent

Year

Growth in IIP and its use-based categories (in per cent): Capital goods

0

5

10

15

20

25

30

Figure 9.2B

Growth incapitalgoods

Trend line

2006-07 2007-08 2008-09 2009-10

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Oct-

Nov

210 Economic Survey 2009-10

Per

cent

Growth in IIP and its use-based categories (in per cent): Intermediate goods

0

5

10

15

20

-10

-5

Figure 9.2C

Growth inintermediate

goods

Trend line

Year2006-07 2007-08 2008-09 2009-10

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Oct-

Nov

Per

cent

Year

Growth in IIP and its use-based categories (in per cent): DurablesFigure 9.2D

0

5

10

15

20

25

30

Growth indurables

Trend line

2006-07 2007-08 2008-09 2009-10

-5

-10

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Oct-

Nov

Per

cent

Year

Growth in IIP and its use-based categories (in per cent): Non-durablesFigure 9.2E

Growth innon-

durables

Trend line

2006-07 2007-08 2008-09 2009-10

0

5

10

15

20

-10

-5

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Oct-

Nov

Per

cent

Year

Growth in IIP and its use-based categories (in per cent): IIPFigure 9.2F

Growthin IIP

Trend line

2006-07 2007-08 2008-09 2009-10

0

2

4

6

8

10

12

14

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Oct-

Nov

211Industry

DEVELOPMENTS THAT IMPACTED THESLOWDOWN AND RECOVERY

The slowdown

9.5 A brief recap of the process of slowdown in theIIP since 2007-08 would be useful in appreciatingthe current process of recovery. The decline inindustrial growth, as measured by the IIP, started inthe first quarter of 2007-08 and continued throughthe first half of 2008-09 at a gradual pace. Persistentrise in the price of crude during January 2006-July2008 and the rise in price of other intermediates(global commodity price shock), particularly metalsand ores, from the latter half of 2006-07 to the secondhalf of 2008-09, had their effect on the cost side ofthe manufacturing sector. A comparison of the majorcomponents of expenditure for a sample ofmanufacturing companies suggests that even by thesecond half of 2007-08, the cost structure hadworsened. This got accentuated in the first twoquarters of 2008-09 (Table 9.2).

9.6 The deepening of the global financial crisisimmediately following the commodity price shockmade it increasingly difficult for companies to raiseresources in 2008-09. On the external front, there

was a sharp decline in the flow of funds fromAmerican/ global depository receipts (ADRs/GDRs)and external commercial borrowings; but the inflowsof foreign direct investment (FDI) continued.Domestically, the mobilization of resources by theprivate sector through the capital market, especiallythe equity route, saw a precipitous decline during2008-09. However, bank credit to the industrial sectorrecorded impressive growth during 2008-09 and insome ways filled the gap due to the sudden shrinkageof other sources.

9.7 The drying up of trade credit, especially offoreign banks, since mid-September 2008 and thesharp depreciation in the nominal exchange rate ofthe rupee within a short span of time made it difficultfor manufacturers to hedge their positions andfinance their ongoing operations. The shrinkage inexport demand that started from September 2008further affected the export-intensive industries. Thesharp reversal in commodity prices from the thirdquarter of 2008 adversely affected such units in termsof build-up of inventories. The decline in constructionand real estate activities affected the segments ofmanufacturing linked to them. These developmentsultimately impacted the growth of profits of themanufacturing sector. From the abridged results of

Table 9.2 : Year-on-Year Growth in Sales and Expenditure of listed public limited manufacturingcompanies in the private sector

Items 2007-08 2008-09 2009-10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3(P)

No. of Companies 1,811 1,716 1,780 1,803 1,926 1,837 1,849 1,901 1,752 1,752 1857

Growth rates (in per cent)

Sales 17.0 12.7 15.4 18.7 30.1 32.1 6.3 0.1 -2.9 -0.3 28.7

Change in Stock-in-trade -18.2 -13.2 -0.8 151.6 131.9 230.1 @ @ -70.0 -1.3 $

Expenditure 16.0 12.0 15.9 21.0 34.3 38.8 9.3 -2.9 -6.6 -3.3 26.6

Raw Material 17.9 10.1 15.3 20.3 38.1 44.0 4.0 -9.6 -14.5 -4.7 35.5

Staff Cost 19.0 16.8 18.3 16.6 19.3 17.0 12.4 7.9 10.1 9.4 12.0

Power & Fuel 9.6 6.6 13.7 25.8 28.8 37.8 21.7 3.1 -1.4 -5.4 1.6

Interest Costs 7.8 15.1 35.6 30.8 52.0 69.9 60.5 43.3 10.1 -1.2 -4.8

Profit after tax (PAT) 27.6 19.1 30.2 15.7 6.9 -4.2 -66.4 -28.3 2.7 16.9 177.7

Ratios (in per cent)

PAT to Sales 10.5 10.6 11.4 9.5 8.7 7.6 3.6 6.7 9.4 9.0 8.0

Source : Reserve Bank of India Studies on Corporate Performance based on a abridged results of selectcompanies in the private corporate sector.

Note: P : Data for Q3 : 2009-10 is provisional; @ Numerator is negative; $ : Denominator is negative


a sample of manufacturing companies, it is seenthat while profitability (PAT / sales) was under strainsince the fourth quarter of 2007-08, it came downsharply in the third quarter of 2008-09 accompaniedby a sharp dip in growth in sales (Table 9.2).

The recovery9.8 Reflecting the continuance of the developments,the manufacturing sector remained subdued in thefirst two months of the current fiscal, which reducedthe level of growth of the IIP in the first quarter to 3.8per cent. However, there were visible signs of thereversal of the downward trend in growth in IIP growthfor the month of June 2009. Thereafter, the IIPmarched ahead, registering growth close to 10 percent during July - November 2009 (Table 9.1).9.9 The growth in sales revenues of companies,which remained quite impressive at around 30 percent during the first half (H1) of 2008-09, slowed downduring H1 2009-10 largely due to lower pricerealisation (Table 9.2). Though year-on-year nominalsales growth remained subdued between quartersending March 2009 and September 2009, the growthin sales and stock in trade adjusted for pricesreflected improvement in production which was alsocoroborated by the rise in IIP. The momentum indemand was also reflected in the sequential growthin sales revenues. The latest quarter endedDecember 2009 witnessed noticeable accelerationin sales, mostly driven by increase in volumes;supported also by low base of corresponding quarterlast year. Increase in sales revenue together withsignificantly lower input costs, lower rise in interestoutflow, lower foreign exchange-related losses andgood growth in non-core other income boosted netprofits (Table 9.2). Expenditure on raw materials thatfell during first two quarters of 2009-10 mainly onaccount of lower commodity prices showednoticeable increase as prices, firmed up again inthe third quarter. The measure of inflation in use-based industrial groups (a ‘rough’ measure becauseof lack of one-to-one correspondence between the

IIP and wholesale price index [WPI]) showed thatthe prices of items that are employed at differentstages of manufacturing have declined during April-December 2009 (Table 9.3). In contrast, the pricesof non-durable items of consumption remained firmduring the period.

9.10 Stocks in trade that were accumulated duringthe first half of 2008-09 were depleted during thelatter half indicating adjustments of inventory levelsto changes in business demand. Stock in tradepicked up slowly in the current period indicating revivalin the cycle (Table 9.2).

9.11 Mobilization of investible resources becameeasier during H1 2009-10. Despite significantdeceleration in bank credit in the current year,buoyant sources like rights and public issues,qualified institutional placements, private placementof corporate debt, mutual funds and commercialpapers as well as a steady flow of external fundsthrough FDI, ADRs/GDRs and external commercialborrowings indicate that mobilizing resources formanaging the recovery may not be an issue.

Growth in major industrial groups9.12 The major industrial groups like automobiles,rubber and plastic products, wool and silk textiles,wood products, chemicals and miscellaneousmanufacturing staged a strong recovery during April-November 2009, while machinery and textile productsreinforced their growth (Table 9.4). Led by cement,non-metallic mineral products also staged a recovery,albeit a modest one. After posting a growth of around14 per cent annually in the eight-year period ending2008-09, beverages and tobacco productsexperienced a slump in the current year. Productgroups like paper, leather, food and jute textiles didnot evince any visible recovery. Cotton textiles andmetal products have also been experiencinglacklustre growth since 2007-08. Overall, thepicture is a mixed one in the analysis of majorindustrial groups.

Table 9.3 : Inflation (in per cent) in use-based industrial groups (WPI based; year-on-year)

2006-07 2007-08 2008-09 2008 2009(April-Dec.) (April-Dec.)

Basic Goods 5.8 2.7 9.0 11.9 -6.0

Capital Goods 8.8 8.6 5.2 6.4 -2.3

Intermediate Goods 5.5 3.3 10.3 14.0 -4.7

Durables 2.0 4.3 3.2 3.5 1.6

Non-durables 3.7 1.9 7.2 7.2 9.8

Source : Department of Industrial Policy & Promotion.

213Industry

9.13 The chemical group and machinery andequipment (with high weights) together contributed53 per cent of the manufacturing growth in April-November 2009 (Figure 9.3). These two productgroups, together with transport equipment and rubber,plastic, petroleum and coal products, explained morethan three-fourths of the manufacturing growth duringthe period (contribution of a particular group to totalmanufacturing growth is determined by the weight

of the group in manufacturing, the accumulated indexof production and current growth). The distinctchanges from the previous to current year (April-November) are the sharp decline in growthcontribution of the beverages and tobacco group andthe significant improvement in contribution of rubber,plastic, petroleum and coal products.9.14 An analysis of the trends in the use-basedindustrial groups (Figure 9.1) and sectoral categories

Per

cent

Contributions of product groups to manufacturing growth (in per cent)

0

5

10

15

20

25

Figure 9.3

Apr-Nov2008

Apr-Nov2009

30

35

40

-5

-10

Food

Pro

duct

s

Beve

rage

s, to

bacc

o

Jute

text

iles

Leat

her p

rodu

cts

Pape

r pro

duct

s

Met

al p

rodu

cts

Cotto

n te

xtile

s

Woo

d pr

oduc

ts

Text

ile p

rodu

cts

woo

l, si

lk, e

tc te

xtile

s

Non-

met

min

pro

duct

s

Mis

cella

neou

s

Basi

c m

etal

s

Rubb

er, p

last

ic, p

etro

& c

oal

Tran

spor

t equ

ipm

ent

Chem

ical

s

Mac

hine

ry &

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ipm

ent

Table 9.4 : Growth by industrial groups (Figures in per cent based on the IIP; 1993-94=100)

2007-08 2008-09 H1 2008-09 H2 2008-09 2009-10(April-Nov.)

Overall Manufacturing 9.0 2.8 5.3 0.4 7.7High growth in 2009-10 (April-November)

Transport Equipment 2.9 2.5 12.2 -6.1 13.9Rubber, Petroleum & Plastic 8.9 -1.5 -4.0 0.9 13.5Wool, Silk & Man-made Textiles 4.8 0.0 -0.9 0.9 13.0Miscellaneous Manufacturing 19.8 0.4 -1.1 1.7 12.3Machinery & Equipment 10.4 8.8 10.1 7.6 12.1Wood Products 40.5 -9.6 -6.1 -13.2 10.5Chemicals 10.6 4.1 6.1 2.1 10.0Textile Products 3.7 5.8 5.2 6.3 9.9

Lower growth in 2009-10 (April-November)Non-metallic Mineral Products 5.7 1.2 0.6 1.8 6.4Basic Metals 12.1 4.0 6.7 1.4 4.8Metal Products -5.6 -4.0 1.9 -9.4 4.0Cotton Textiles 4.3 -1.9 0.1 -3.9 3.2Paper Products 2.7 1.8 4.6 -0.8 2.1Leather Products 11.7 -6.9 -1.8 -11.8 0.9

Decline in 2009-10 (April-November)Beverages, Tobacco 12.0 16.2 20.3 12.3 -2.2Food Products 7.0 -9.7 -1.0 -15.1 -7.2Jute Textiles 33.1 -10.0 -5.4 -14.6 -16.2Source : CSO.

214 Economic Survey 2009-10subsumed under the National Industrial Classification(Table 9.4) in tandem makes the industrial scenariosomewhat clearer. Among the use-based industrialgroups, basic goods (with a weight of 35.6 per centin the IIP) are composed mainly of basic chemicals,basic metals, cement, electricity and minerals.Electricity and mining account for about 58 per centof the weight of basic goods captured by the IIP andthe growth of basic goods during April-December2009 largely reflected the growth in the two sectors.While other important basic goods like cement andfertilizers recorded reasonable growth, differentcomponents of the iron and steel industry showed amixed picture.

9.15 The strong growth in the machinery andequipment group fed into the growth in capital goods,while some automobile components like commercialvehicles exhibited slack in growth. Despite thelacklustre production performance of petroleumproducts (except natural gas) and textileintermediates, intermediate goods registered robustgrowth in H1 2009-10, aided by the strong growth inimportant items like PVC pipes, commercialplywood, chemical intermediates like paints, graniteand stone chips filament yarn, polyster fibre, viscosestaple fibre and a wide range of other items.

9.16 Growth in consumer durables has been broad-based, the robust production performance ofautomobiles being quite significant. On the otherhand, the low growth in food products, beveragesand tobacco products and cloth and footwear actedas a dampener on the growth in consumer non-durables. Paradoxically, disaggregated growth in

consumer non-durables indicates that the scenariois not as bleak as exhibited by the group as a whole.The strong contractionary movement in someimportant items like sugar, milk powder, beveragesand some pharmaceuticals has had exaggeratedimpact, leading to negative growth in consumer non-durables during H1 2009-10; otherwise, the majorityof the non-durable items of consumption have shownpositive growth during the period.

INDUSTRIAL GROWTH BY SECTORSFood products9.17 As per the IIP, food products experienced adecline in production of 7.2 per cent in April-November 2009 on an year-on-year basis. This cameon the back of negligible growth during the sameperiod in the previous year. The main growthdampener in food products was sugar production,which declined by 59.6 per cent in the current year(April-November), following an already significantdecline during 2008-09. The other important itemsthat slowed down growth included milk powder,malted food and chocolates and sugar confectionary.Among the important items that exhibited double-digitgrowth were wheat flour/maida, salt, and edible oilslike coconut, rice bran, cotton seed, and mustard/rapeseed. Production of sunflower oil, soya bean oil,edible hydrogenated oil and groundnut oil declined.

Beverages and tobacco products9.18 Beverages and tobacco products declined byabout 2.0 per cent during April-November 2009, asper the IIP data. This group had grown by 17.7 per

Inde

x 19

93-9

4=10

0

Movement in the index of production of food products and beverages andtobacco products (Index 1993-94=100)

100

200

300

Figure 9.4

Foodproducts

Beverages& tobaccoproducts

400

500

0

600

154.5 152.0 168.7167.9 167.3 170.6 185.2

198.2178.9

139.0

200.4 224.8

287.6312.1

345.9400.3

444.5498.0

578.5 562.4

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Apr-Nov2009

Year

215Industrycent during the corresponding period in the previousyear. While food products showed slow growth inthe post-2000 period (compound annual growth of1.8 per cent during 2001-02 to 2008-09), thebeverages and tobacco product group achieved rapidgrowth (compound annual growth of 14.2 per centduring 2001-02 to 2008-09). Hence the slowdownshown by these two groups in April-November 2009,compared to the same period in 2008, needs to beviewed differently (Figure 9.4).9.19 Production of rectified spirit and country liquordeclined while that of beer grew by 14 per cent in2009-10 (April-November). The growth in Indian-madecountry liquor was only 3.1 per cent during the period.Cigarette production has not shown any significantgrowth since 2007-08.

Textiles9.20 As per the IIP data, the textile group consistingof cotton, wool, silk and man-made and jute textilesand textile products, grew by 7.5 per cent duringApril-November 2009, compared to 1.0 per centduring April-November 2008. While wool, silk andman-made textiles grew by 13 per cent during 2009-10 (April-November) shrugging off the weakperformance in the corresponding period last year,cotton textiles barely managed a recovery with3.2 per cent growth. Textile products achieved growthclose to 6.0 per cent in 2008-09 and topped it with9.9 per cent growth during April-November 2009.However, jute textiles which had slid by 3.9 per centin 2008-09, declined again by 16.2 per cent in 2009-10 (April-November).

9.21 Overall, the production of textile fabricsincreased by 10.7 per cent during April-November2009-10 (provisional). The highest growth wasobserved in the hosiery sector (12.8 per cent) followedby power looms (12.5 per cent), while the handloomand mill sectors could not revive from the previousyear’s slump (Table 9.5). The share of the power-looms sector in total fabric production stood at 62.5per cent during April-November 2009—with its sharegradually increasing over the years, the productionof fabric is increasingly driven by power looms.

Table 9.5 : Production of fabrics/cloth(million sq. m)Sector 2006-07 2007-08 2008-09 2009-10

(P) (Apr.-Nov.)(P)

Mill 1,746 1,781 1,796 1,192(5.4) (2.0) (0.8) (-0.1)

Handloom 6,536 6,947 6,677 4,513(7.0) (6.3) (-3.9) (1.7)

Power Loom 32,879 34,725 33,648 25,157(7.4) (5.6) (-3.1) (12.5)

Hosiery 11,504 11,804 12,077 9,047(10.4) (2.6) (2.3) (12.8)

Others* 724 768 768 320(-5.9) (6.1) (0.0) (0.0)

Total Cloth 53,389 56,025 54,966 40,229Production (7.7) (4.9) (-1.9) (10.8)

Source : O/o Textile Commissioner, Mumbai.Notes : (P) Provisional;

* Production up to August 2009; Figures inparentheses are growth in per cent, year-on-year

Table 9.6 : Export of textiles(US$ million)

Items 2006-07 2007-08 2008-09 Apr.-Sept. Growth(P) 2009 (P) Apr.-Sept.

2009 (per cent)Ready-made Garments 8,282.3 9,069.8 10,242.8 4,528.8 -10.3Cotton Textiles 5,564.2 6,858.6 4,741.6 1,788.9 -35.1Wool & Woollen Textiles 423.8 443.1 478.2 240.6 -8.7Man-made Textiles 2,398.9 3,177.1 3,280.5 1,889.8 -2.4Silk 706.0 657.7 675.5 280.7 -24.7Handicrafts* 1,364.9 1,452.3 1,074.0 401.8 -33.6Coir & Coir Manufactures 145.8 160.3 148.0 78.3 -2.7Jute Goods 260.2 327.9 299.1 109.9 -40.8Handloom Products 0.0 0.0 0.0 112.3 0.0

Grand Total 19,146.1 22,146.8 20,939.8 9,431.1 -15.5Source : Directorate General of Commercial Intelligence and Statistics (DGCI&S) Kolkata.Notes : * include only textile-based handicrafts such as, handmade carpets excluding silk; silk carpets;

handicrafts excluding handmade carpets);P : Provisional

216 Economic Survey 2009-109.22 Though the textile sector seemed to havegathered momentum consequent on the terminationof the quota regime in December 2004, theperformance of Indian textiles continues to lagsubstantially behind that of China in terms of rate ofgrowth of exports and share in world textile exports.In US dollar terms, textile exports grew by 15.7 percent during 2007-08 but declined by 5.5 per centduring 2008-09. During April-September 2009,exports of textiles and clothing were at US$ 9.43billion, recording an 15.5 per cent decline in growthvis-à-vis exports of US$ 11.15 billion in April-September 2008 (Table 9.6).

9.23 The Technology Upgradation Fund Scheme(TUFS) and Scheme for Integrated Textile Parks(SITP) are two flagship schemes of the Ministry ofTextiles. TUFS, implemented with a view tofacilitating modernization and upgradation of thetextile industry by providing credit at reduced rates,has been fine-tuned to induce investments in targetedsegments. Under the scheme, Rs 78,307 crore wassanctioned against the project cost of Rs 1,79,856crore and loans worth Rs 66,284 crore weredisbursed to 25,777 applicants up to June 30, 2009(provisional). Under the SITP, 40 integrated textilesparks of international standards, covering theweaving, knitting, processing and garmenting sectorswith project proposals worth Rs 4,141.39 crore (ofwhich assistance from the Government is Rs1,422.43 crore), have been sanctioned. So far, fivetextile parks have been inaugurated.

Wood and wood products9.24 Wood and wood products, as per the IIP data,showed 10.5 per cent growth in production duringApril-November 2009, compared to a 6 per centdecline during the same period in the previous year.Among the two components (included in the IIP),

particle board grew by 7.1 per cent, while commercialplywood grew by 46.3 per cent during the period.Wood and wood products experienced wide-rangingannual fluctuations in production during the post-2000 period and managed only a compound annualgrowth of 1.3 per cent during 2001-02 to 2008-09(Fig 9.5).

Paper and paper products9.25 Paper and paper products grew by only 2.1per cent during April-November 2009, as per the IIPdata. This followed indifferent growth during 2007-08as well as 2008-09. While paper and paper boardand corrugated boxes/cartons achieved reasonablegrowth during the current year, bleached newsprintand rayon-grade pulp declined by more than 10 percent.

Leather and leather products9.26 As per the IIP data, leather products, whichinclude finished leather, leather footwear, shoeuppers, leather garments and other leather goods,showed only 0.9 per cent growth in production duringApril-November 2009, following a 5 per cent declineduring the same period in the previous year.Production of leather and fur products almoststagnated during the post-2000 period (compoundannual growth of 0.5 per cent during 2001-02 to 2008-09) with the exception of 2007-08, while overallmanufacturing grew at a much faster rate (compoundannual growth of 7.3 per cent during 2001-02 to 2008-09) (Fig 9.6).

9.27 Finished leather declined by about 13 percent, causing much of the slowdown in the sectorduring April-November 2009. While footwear itemsshowed a mixed picture, leather garments grew by5.7 per cent during the period.

Inde

x 19

93-9

4=10

0

Movement in the index of production of wood products (Index 1993-94=100)

40

80

120

Figure 9.5

Wood &wood

products

0

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Apr-Nov2009

Year

104.392.8

76.5 81.7 74.8 70.5

91.0

127.9115.6

132.2140

100

60

20

217Industry

Inde

x 19

93-9

4=10

0Movement in the index of production of leather and fur products and theindex of overall manufacturing (Index 1993-94=100)

100

200

300

Figure 9.6

0

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Apr-Nov2009

Year

350

250

150

50

Leather &fur products

Manufac-turing

Chemicals, petrochemicals, pharmaceuti-cals and fertilizers9.28 The sector includes basic chemicals and itsproducts, petrochemicals, fertilizers, paints, gasesand pharmaceuticals. Major chemicals registered acompounded annual growth of 3.1 per cent during2002-03 to 2007-08. In the wake of the recenteconomic slowdown, production declined by 5.2 percent in 2008-09. The growth in major chemicalsstood at (-) 0.91 per cent during April-December 2009(Table 9.7).

9.29 Petrochemicals mainly comprise syntheticfibres, polymers, elastomers, synthetic detergents,intermediates and performance plastics, apart fromtheir intermediates such as synthetic fibreintermediates, olefins and aromatics. Polymersaccounted for almost 62 per cent of the totalproduction of major petrochemicals during 2008-09.The production of petrochemicals grew at 5.8 percent annually during 2002-03 to 2007-08. Registeringthe impact of the global meltdown, it declined by 5.5per cent in 2008-09. During April-December 2009,major petrochemicals except polymers recorded

positive growth of 0.76 per cent; performance plasticsand synthetic fibres registered impressive growth(Table 9.8).

9.30 The share of chemicals and petrochemicalsin total national exports diminished from 11.6 percent to 9.3 per cent during 2003-04 to 2008-09.Likewise, imports of this group in total nationalimports declined from 9.2 per cent to 7.2 per centduring 2003-04 to 2008-09 (Table 9.9).

Table 9.7 : Production of major chemicals(in 000’ MT)

Years Alkali Other Or- Pest- Dyes Totalchem- inor- ganic icides & major

icals ganic chem- (Tech.) stuffs chem-chemi- icals icals

cals

2006-07 5,269 602 1,545 85 33 7,5342007-08 5,443 609 1,552 83 44 7,7312008-09 5,442 513 1,254 85 32 7,3262009-10 4,133 382 920 58 30 5,523(Apr.-Dec.)Growth -0.72 -5.53 -5.55 -13.19 21.51 -0.91(per cent)

Source : Department of Chemicals & Petrochemcials.

Table 9.8 : Production of major petrochemicals(000’ MT)

Years Synthetic fibers Polymers Elastomers Synthetic Performance Total majordetergent plastics petro-

intermediates chemicals

2005-06 1,906 4,768 110 555 127 7,4662006-07 2,250 5,183 101 556 133 8,2232007-08 2,524 5,304 105 585 157 8,6752008-09 2,343 5,060 96 552 141 8,1922009-10 (Apr.-Dec.) 1,948 3,549 79 461 129 6,166Growth (per cent) 13.23 -6.71 9.45 9.57 26.51 0.76

Source : Department of Chemicals & Petro-chemcials.


Pharmaceuticals9.31 The Indian pharmaceutical industry has grownfrom a humble Rs 1,500 crore turnover in 1980 toapproximately Rs 1,00,611 crore in 2009-10(September 2009). The country now ranks third interms of volume of production (10 per cent of globalshare) and 14th by value. The Indian pharma

industry’s growth has been fuelled by exports whichregistered a growth of 25 per cent in 2008-09 (Figure9.7). Exports of pharmaceuticals have consistentlyoutstripped imports. India currently exports drugintermediates, active pharmaceutical ingredients(APIs), finished dosage formulations, bio–pharmaceuticals and clinical services. The top fivedestinations of Indian pharmaceutical products arethe USA, Germany, Russia, the UK and China. Thedomestic pharma sector has also expanded in recentyears.

9.32 There are five pharmaceutical Central public-sector/joint-sector undertakings under theDepartment of Pharmaceuticals which manufacturecritical bulk drugs/ formulations. These are IndianDrugs & Pharmaceuticals Limited, HindustanAntibiotics Limited, Bengal Chemicals &Pharmaceuticals Limited, Rajasthan Drugs andPharmaceuticals Ltd and Karnataka Antibiotics &Pharmaceuticals Ltd. The value of their productionincreased from Rs 340.2 crore in 2006-07 to Rs 641.8crore in 2008-09 and is projected to reach Rs 875crore in 2009-10.

Rs

cror

e

Indian Pharmaceutical Market (Rs crore)

20000

40000

60000

Figure 9.7

0

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Year

70000

50000

30000

10000

Domesticmarket

Exports80000

90000

Imports

Totalmarket size

Table 9.9 : Exports and imports–Chemicalsand petrochemicals

(Rs crore)Items 2006-07 2007-08 2008-09

Exports:

(a) Chemicals 39,351 43,482 53,738(b) Petrochemicals 21,801 22,199 24,226(c) Sub-Total (a+b) 61,152 65,681 77,964Imports:(a) Chemicals 47,914 54,422 74,857(b) Petrochemicals 16,339 18,677 24,020(c) Sub-Total (a+b) 64,253 73,099 98,877

Source : Department of Chemicals & Petro-chemcials.

Table 9.10 : Production and import of fertilizers( lakh MT)

Production ImportsYear 2007-08 2008-09 2009-10* 2007-08 2008-09 2009-10**

Urea 198.6 199.2 212.4 69.3 56.7 44.9

DAP 42.1 29.9 43.0 29.9 61.9 55.6

Complex Fertilizers 58.5 68.5 79.2

MOP Nil Nil Nil 44.2 56.7 42.3

Source : Department of FertilizersNotes : * estimated; **April-December 2009-10

219Industry

Fertilizers9.33 The availability of raw materials andintermediates has been a major bottleneck in thedomestic production of fertilizers. As there is nodomestic production of muriate of potash (MOP), itsrequirement is met fully by import (Table 9.10). About85 per cent of raw materials in Di ammoniumphosphate (DAP) or finished DAP and complexesare also being imported.

Rubber and plastic products9.34 Rubber and plastic products grew by anappreciable 25 per cent during April-November 2009as per IIP data. The factor that overwhelminglycontributed to this growth was the 54.5 per centgrowth in PVC pipes and tubes during the period, incontrast to a 17 per cent decline during April-November 2008. With the automobile sector recordingstrong growth in the current year so far, the tyresector (except bicycle tyres) too performed well onthe whole.

Non-metallic mineral products9.35 As per the IIP, this product group grew by 6.4per cent during April-November 2009, as againstnegligible growth during the corresponding period inthe previous year. Cement led the group with a closeto 11 per cent growth. This, along with strong growthin polished granite/stone chips, points towardsimproving construction activity. Among importantitems, bottles and bottle glasswares continued thedecline shown in 2008-09. Production of railway/concrete sleepers stepped up while that of graphiteelectrodes and anodes declined steeply during thecurrent year.

Steel9.36 India ranked as the fifth largest producer ofcrude steel in the world during January -November2009 (World Steel Association). Domestic crudesteel production grew at a compounded annual rateof 7.1 per cent during 2004-05 to 2008-09. Theincrease in production came on the back of capacityexpansion, mainly in private-sector plants, and higherutilization rates. During 2008-09, India added nearly5.5 million tonnes of capacity in steel production.

9.37 In 2008-09, the Indian iron and steel industrywas hit hard by the spiralling cost of imported cokingcoal/metcoke. The first half of 2008-09 witnessedrapid rise in production, consumption and prices, inkeeping with international trends. In the latter half,however, the domestic demand for steel wasadversely impacted by economic slowdown and, inparticular, by slackening demand in some of itsleading end-user segments. Domestic steel pricesstarted declining from September 2008 and the paceof growth of production slowed down considerably(Table 9.11).

Table 9.11 : Production, consumption, import and export of total finished steel and pig iron(million tonnes)

Item 2005-06 2006-07 2007-08 2008-09 Change (per cent)over 2007-08

Production for Sale TFS 46.56 52.53 56.07 57.16 1.9PI 4.69 4.93 5.284 6.21 17.52

Import TFS 4.31 4.93 7.03 5.84 -16.9PI 0.03 0.03 0.11 0.08 -27.3

Export TFS 4.80 5.24 5.08 4.44 -12.6PI 0.44 0.71 0.56 0.35 -37.5

Real Consumption1 TFS 41.43 46.78 52.12 52.35 0.4PI 4.13 4.33 4.62 5.87 27.1

Source : Joint Plant Committee.Notes : TFS= total finished steel, both alloy and carbon; PI= Pig iron1= adjusted for stock variation and double counting.

Table 9.12 : Growth in finished steel(alloy + carbon)

(per cent)2009-10* Real

Production consum- Imports Exportsfor sale ption

April-June 3.4 5.2 -1.3 -38April–September 3.3 7.0 1.2 -43April-December 3.8 7.7 16.6 -36

Source : Joint Plant Committee. Note : * provisional.

220 Economic Survey 2009-109.38 However, recovery gathered strength during2009-10 and the Indian steel industry appears tohave successfully overcome the effects of the globaleconomic slowdown (Table 9.12). India and Chinaare the only countries to have registered a positivegrowth during January-November 2009 (World SteelAssociation).

9.39 The strong growth in the GDP in the secondquarter of the current fiscal and in the IIP during April-November 2009 suggests that the demand side ofthe steel industry is back on stable footing. Indiansteel outlook for 2010 continues to be positive, sinceIndian steel consumption is expected to be rising at6-9 per cent during the current year, on account ofhigher demand from the real estate, constructionand automobile sectors.

Metal products (except machinery)9.40 The production of this group declined during2007-08 and 2008-09. During April-November 2009,production grew by 4 per cent. Important items likewell/offshore platforms, tin metal containers,agricultural implements and bolts and nuts continuedtheir declining trend during the current year. Metallicutensils including pressure cookers, LPG cylindersand drums and barrels registered robust growth duringApril-November 2009.

Machinery and equipment9.41 Growth of the machinery and equipmentgroup has been at the core of the growth in capitalgoods, as it constitutes around 65 per cent of thetotal weight of capital goods in the IIP. Growth in thisgroup is critical for growth in the overall IIP for the

coming years. The growth in machinery andequipment has consistently been above the 10 percent mark since 2003-04 and it achieved a compoundgrowth of 14.4 per cent during the quinquenniumending 2007-08, compared to a corresponding rateof 8.7 per cent in the overall IIP. The index ofproduction of machinery and equipment gallopedahead of the overall IIP after the year 2002-03(Figure 9.8).

9.42 Though it fell below the 10 per cent mark in2008-09, growth in the group remained one of thehighest at 8.8 per cent. During 2009-10 (April-November), this segment gained further strengthwith a 12.1 per cent growth. Important items likeindustrial machinery, tractors, ball and rollerbearings, power transformers, insulated cables andwires, boilers, electric generators, turbines, electricmotors, power-driven pumps, material-handlingequipment, cutting tools, conductors, electric fans,washing machines and TV receivers and picturetubes buoyed growth in this manufacturing groupduring 2009-10 (April-November). On the other hand,products like diesel engines, telephone instrumentsand telecom-munication cables, protectionsystems, control panels, cranes, lifts, hydraulicmachines and cylinders, dumpers, furnaces, valves,cooling towers, refrigerators and air conditioningplants, air and gas compressors and computersystems dampened its growth.

Electronics and Information Technology9.43 The economic recession in leading exportdestinations adversely impacted the performance ofIndian IT companies.

Inde

x 19

93-9

4=10

0

Movement in the index of production of machinery and equipment and theoverall IIP (Index 1993-94=100)

100

200

300

Figure 9.8

0

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Apr-Nov2009

Year

350

250

150

50

Machinery&

equipment

IIP

400

450

500

221Industry

9.44 The increase of 14.6 per cent in software andservices exports in 2008-09 (Table 9.13) was the neteffect of a growth of 35.3 per cent in the first sixmonths and a decline of 1.9 per cent in the next sixmonths (Table 9.14). The decline continued in thefirst half of 2009-10 as well.

9.45 During 2008, electronics hardware productionin India constituted around 1.5 per cent of globalelectronics production. The production of electronicshardware in the country stood at Rs 94,690 crore in2008-09 (Table 9.15), registering a growth of 12.1per cent, compared to a growth of 27.8 per cent in2007-08; the decline is attributable to the globaleconomic slowdown.

Micro, small and medium enterprises(MSMEs)9.46 MSMEs contribute about 8 per cent of theGDP of the country, about 45 per cent ofmanufactured output and about 40 per cent ofexports. This, coupled with a high labour to capitalratio, high growth and high dispersion makes themcrucial for achieving the objective of inclusive growth.As per the Quick Results of the 4th All India Censusof MSMEs (2006-07), there were 26 million MSMEsin the country, which provided employment to about60 million persons. Of the total, 28 per cent were in

Table 9.14 : Software & services exportsYear Growth (per cent)

(first half) (second half)2006-07 37.21 27.562007-08 26.27 32.942008-09 35.35 -1.872009-10 -11.5

Source : RBI & NASSCOM.

Table 9.13 : Growth in IT-ITeS industries(US$ billion)

Item 2006-07 2007-08 2008-09

IT-IT-enabledServices Revenue 47.8 64.1 70.5(including Hardware) (34.1) (9.9)

Software & ServicesIndustry (excluding 39.3 52.1 58.7hardware) (32.6) (12.7)

Total Software andServices Exports 31.1 40.4 46.3(including ITeS-BPO) (28.9) (14.6)

IT BPO Revenuefrom the Domestic 8.2 11.7 12.4Market (42.7) (5.9)

IT Software andServices 1.62 2.01 2.20Employment (million)Source : Department of Information Technology (DIT);Note: Figures in parentheses represent change inper cent.

Table 9.15 : Electronics & IT production(Rs crore)

Items 2005-06 2006-07 2007-08 2008-09*

1. Consumer Electronics 18,000 20,000 22,600 25,9902. Industrial Electronics 8,800 10,400 11,910 12,7403. Computers 10,800 12,800 15,870 13,4904. Comm. & Broadcasting Equipment 7,000 9,500 18,700 26,0005. Strategic Electronics 3,200 4,500 5,700 6,8406. Components 8,800 8,800 9,630 9,630Subtotal 56,600 66,000 84,410 94,6907. Software for Exports 1,04,100 1,41,000 1,64,400 2,16,3008. Domestic Software 29,600 37,000 47,010 57,230Total 1,90,300 2,44,000 2,95,820 3,68,220Electronics & IT exports1. Electronics Hardware 9,625 12,500 13,200 19,0002. Computer Software 1,04,100 1,41,000 1,64,400 2,16,300Total 1,13,725 1,53,500 1,77,600 2,35,300Source : DIT Annual Report, 2008-09.Note : * Estimated


the manufacturing sector and 72 per cent in theservice sector. This is the first Census after theenactment of the MSMED Act 2006 and includes,for the first time, medium enterprises.

Central Public-sector Enterprises (CPSEs)9.47 There were altogether 246 CPSEs under theadministrative control of various ministries/departments as on March 31, 2009. The cumulativeinvestment (paid-up capital plus long-term loans) inall the CPSEs together stood at Rs 5,28,951 croreas in end-March 2009 (Table 9.16). The largestshare in this investment belonged to the servicesector (46.1 per cent) followed by electricity (26.2per cent), manufacturing (18.1 per cent) and mining(8.8 per cent). A great deal of investment in CPSEsis being made through internal resources rather thanthrough investment from outside.

9.48 Of the total, 158 CPSEs made net profit and54 net loss in 2008-09. The year witnessed severefinancial under-recoveries by public-sector OilMarketing Companies (OMCs) as they had to keepthe prices low on sale of petroleum products in thedomestic market. The foreign exchange outgoexceeded the foreign exchange earnings of CPSEsduring 2008-09 (Table 9.16).

Tourism9.49 The global financial crisis affected growth intourism in 2008-09. The Ministry of Tourism madeconcerted efforts including a series of promotionalinitiatives to counter the impact of the slowdown.Foreign tourist arrivals and foreign exchange earningshave so far registered positive growth in the year2009-10 (Table 9.17).

9.50 Initiatives have been taken to develop worldclass tourism infrastructure through Central financial

Table 9.17 : Number of foreign and domestictourists

Year Foreign *Foreign *Domestictourist exchange tourist

arrivals earnings visits (lakh) (million (lakh)**

US$)

2006-07 46.7 (13.8) 9,123 ( 16.2) 4,623.1

2007-08 51.7 (10.7) 11,666 (27.9) 5,265.6

2008-09 50.7 (-1.9) 10,543 (-9.6) 5,629.2

2009-10 37.2 (1.1) 8,663 (10.9) NA(April-Dec.)

Source : Ministry of Tourism.Note : * Figures in parenthesis are growth rates (per cent).

** Domestic tourist visits for calendar years.

Table 9.16 : Performance of CPSEs during 2008-09(Rs crore)

Sl. Particulars 2008-09 2007-08 Per cent changeNo. over previous year

1. Investment(long-term loan + equity) 5,28,951 4,55,367 16.22. Capital Employed (net fixed assets +

working capital) 7,93,096 7,23,719 9.63. Total Turnover 12,63,405 10,94,484 15.44. Profits of Profit-making CPSEs 98,652 91,571 7.75. Losses of Loss-making CPSEs 14,424 10,257 40.66. Net Worth 5,84,072 5,18,530 12.67. Dividend Declared 25,493 28,081 -9.28. Corporate Tax 1,51,728 1,65,994 -8.69. Interest Paid 40,330 32,200 25.210. Contribution to Central Exchequer 1,51,728 1,65,994 -8.611. Foreign Exchange Earnings 74,184 67,678 9.6

11.1 Oil Companies 48,422 46,051 5.111.2 Other Companies 25,762 21,627 19.1

12. Foreign Exchange Outgo 4,28,821 3,68,228 16.512.1 Oil Companies 2,78,989 2,57,723 8.312.2 Other Companies 1,49,832 1,10,505 35.6

Source : Department of Public Enterprises.

223Industryassistance to States/Union Territories for identifiedcircuits and destinations. These include megaprojects, human resource development, augmentingaccommodation infrastructure, positioning Indiantourism products in domestic and overseas marketsand promoting India as a round-the-year tourismdestination through an integrated media strategyunder the “Incredible India” brand. The new initiativesinclude development of heliports, cruise, caravan,wellness and MICE (meetings, incentives,conferences and exhibitions) tourism. In order toensure environmental sustainability and createemployment opportunities, “responsible tourism” isbeing pursued by enhancing stakeholder orientationin rural, eco-adventure, wildlife and wellness tourism.

9.51 The Ministry of Tourism continued its effortsto reinforce its brand through Incredible Indiacampaigns. Print media and advertising campaignshave been undertaken in overseas locations. TheMinistry has also launched the “Visit India 2009”scheme whereby attractive incentives are beingoffered to foreign tourists. Market developmentassistance (MDA) being given to tourism serviceproviders for sales-cum-study tours, participation infairs and exhibitions and publicity through printedmaterials, has been liberalized. Through socialawareness campaigns, attempt was made to

sensitize stakeholders to the importance of tourismand protection of heritage sites and through genericcampaigns, awareness about various destinations/sub-tourism products was generated. For identifieddestinations/circuits covered by the Jawaharlal NehruUrban Renewal Mission (JNURM) convergence ofresources is being ensured so that tourism-relatedinfrastructure and urban civic infrastructurecomplement each other.

Financing and investment9.52 Gross capital formation (GCF) inmanufacturing grew at a compound annual rate of26.2 per cent during 2003-04 to 2007-08. As theNational Accounts data on capital formation areavailable only till 2007-08, it is not possible to analysethe trends beyond that year. However, the increasein the investment demand is evident from the stronggrowth in capital goods recorded during June-November 2009. In the absence of hard data oncapital formation and capacity addition in industryfor the current period, information on the mobilizationof investible resources by the sector from differentsources would be instructive.

9.53 In recent years, especially from 2004-05, theIndian private corporate sector has started to raiseexternal capital (i.e. other than internal resources)

Table 9.18 : Flow of financial resources to commercial sector

Item April-November*2007-08 2008-09 2008-09 2009-10

Domestic Sources (in Rs crore)

Public Issues and Rights issues (except Banks/FIs) 56,074 16,220 12,686 19,496

Qualified Institutional Placements (QIPs) 25,525 189 75 34,167

Gross Private Placements by NFIs 68,249 77,891 44151 81617#

Net Issuance of CPs Subscribed by Non-banks 10,660 5,590 22,187 51,012#

Bank Credit to Industry (incl. Infra) 1,69,536 1,87,515 1,43,300 99,332Systemically Important Non-deposit taking NBFCs(net of Bank Credit) 36,460 76,828 37,744 17,990 ^

Mutual Funds Investments in Debt (Non-Gilt) 88,457 -32,168 19,896 1,01,956#

LIC’s Gross Investment in Corporate Debt,Infrastructure and Social Sector 24,275 65,815 10,686 18,027 ^

Foreign sources (in US $ million)FDI 34,835 35,180 24,693 26,506$

ADR/GDR issues (excluding Banks & FIs) 6,645 1,162 1,142 3,152$

External Commercial Borrowings / FCCB 30,293 15,244 6,332 5,168

Source : RBI/SEBI.Note : * Comparable period for respective items. ^ Data pertain to April-August.

# Data pertain to April-September. $ Data pertain to April-DecemberData for 2006-09 and 2009-10 are provisional.

224 Economic Survey 2009-10mainly to fund its investment and this includes foreigninstitutional sources. Data on sources and uses offunds for a sample of non-financial public limitedcompanies available till 2006-07 (in a study by theRBI) shows that the share of external finance wasas much as 64.1 per cent of the total sources. Someof the predominant sources, other than banks andfinancial institutions, include resource mobilizationthrough the issue of equities and bonds, privateplacement, private equity and commercial papers,and foreign sources like FDI, ADRs/GDRs andexternal commercial borrowings (Table 9.18). It isdifficult to compare quantities as sources ofexclusively financing the industrial sector (includinginfrastructure), as most of these quantities combinethe total commercial mobilization of resources, ofwhich industry forms only a part.

9.54 Given the caveat, three tentative conclusionsseem contextually relevant for the current year sofar. First, the growth in bank financing of the industrialsector decelerated significantly during April-November 2009-10. Second, the mobilization offinancial resources from the domestic non-banksector, including the capital market, has beensignificantly higher during the period compared tothe corresponding period in 2008-09. Third, the inflowof investible resources from external sources was

comparable with higher flows from ADRs/GDRsand FDI.

Industrial credit9.55 The growth in credit to industry declinedsteeply from 37.0 per cent in November 2008 to 14.2per cent in November 2009, on an year-on-year basis(Table 9.19). The sectoral composition of the grossdeployment of bank credit to industry, includinginfrastructure, shows widely varying patterns. It isthe infrastructure sector that kept growth in industrialcredit at the level of 14.2 per cent during November2009 (Table 9.19). Net of infrastructure, the growthin industrial credit was significantly lower, that is 4.6per cent in November 2009, compared to 36.5 percent during the corresponding period of the previousyear.

9.56 With the organized sector having access tovarieties of financial instruments to raise resources,the implications of a deceleration in credit growth forsmaller-scale enterprises can be more pronounced.Industrial credit to micro and small enterprises(including service-sector enterprises) grew at a higherrate (19.3 per cent) in November 2009 compared tothe credit growth in the overall industrial sector.Further, industrial credit to micro and smallenterprises in the manufacturing sector also grew at

Table 9.19 : Industry-wise deployment of gross bank credit

Sector % Growth (y-o-y) Share in outstandingcredit to industry(%)

Nov. 2008 Nov. 2009 Nov. 2008 Nov. 2009

Mining and Quarrying (incl. Coal) 53.0 2.6 1.5 1.3Food Processing 23.2 5.9 5.0 4.6Beverage & Tobacco Products 45.2 49.2 0.7 0.9Textiles 21.2 7.4 10.0 9.4Leather & Leather Products 12.5 -0.5 0.6 0.5Wood and Wood Products 47.2 4.1 0.4 0.4Paper & Paper Products 29.7 11.0 1.5 1.5Petroleum, Coal Products and Nuclear Fuels 149.2 -22.0 8.6 5.9Chemicals and Chemical Products 39.2 1.0 7.5 6.6Rubber, Plastic & their Products 33.4 6.5 1.3 1.2Cement and Cement Products 80.5 18.3 1.8 1.8Basic Metals and Metal Products 27.0 18.3 12.3 12.8All Engineering 26.5 4.7 6.2 5.7Transport Equipment 42.5 -2.9 3.7 3.1Construction 59.9 8.9 3.4 3.2Infrastructure 38.6 47.2 22.5 29.0Industry Total (Small, Medium & Large) 37.0 14.2 100.0 100.0Industry Total minus Infrastructure 36.5 4.6 77.5 71.0

Source : RBI.Notes : Data are provisional and relate only to select banks.

225Industry

19.0 per cent. The corresponding figures duringNovember 2008 stood at 20.0 per cent and 21.5 percent respectively.

FDI9.57 FDI inflows to India, which remained robust in2008-09 despite the slump in global financial flows,have also continued to flow smoothly during thecurrent year so far. During April-November 2009-10,total FDI equity inflows stood at Rs 93,354 crore(US$ 19,379 million) as against Rs 85,700 crore (US$19,791 million) during the corresponding period in2008-09, signifying a growth of 9 per cent in rupeeterms and a decline of 2 per cent in US dollar terms;the divergent patterns in growth rates beingattributable to exchange rate changes during theperiod. During 2008-09, total FDI equity inflows stoodat Rs1,22,919 crore (US$ 27,309 million) as againstRs 98,664 crore (US$ 24,579 million) during 2007-08, signifying a growth of 25 per cent in rupee termsand 11 per cent in US dollar terms (Table 9.20).

9.58 The sectoral shares of FDI inflows havefluctuated significantly in recent years. Sectors likeagricultural services, sea transport and electricalequipment have shown a quantum jump in FDI inflowsduring 2009-10.

POLICY DEVELOPMENTS ANDPROGRAMMES

9.59 The developments in terms of policy responsesduring 2008-09 were to an extent shaped by theeffects of the global financial crisis on Indian industry.Measures taken specifically for the industrial sectorincluded fiscal measures and measures to ensureavailability of credit. Broadly, the effort in this regardwas to mitigate the sharp impact of the globalrecession on industry, especially the export-orientedsectors that were the most directly affected. Apartfrom the general stimulus measures announced bythe Government and the RBI for the industrial sector,the following sector-specific measures andprogrammes have been undertaken.

Textiles9.60 Stimulus measures announced on December7, 2008 that benefited the textile sector includedgeneral reduction of 4 per cent in Central value addedtax (CENVAT ) rates; abolition of 4 per cent optionalCENVAT on cotton textiles; extension of the benefitof service tax refund to service provided by clearingand forwarding agents to exporters; increase in thethreshold limit of refund of service tax paid byexporters on foreign commission agent service;

Table 9.20 : Sectors attracting highest FDI flows(Rs crore)

Sector April-November Growth(per cent)

2007-08 2008-09 2009-10 in 2009-10

Services Sector 9,121 1,5919 16,566 4.06Telecommunications 3,963 9,231 10,811 17.12Housing & Real Estate 5,161 8,353 10,565 26.48Construction 3,593 7,490 8,380 11.88Agriculture Services 426 16 6,327 39,443.8Power 208 3,420 5,994 75.26Automobile Industry 1,191 3,401 4,499 32.28Computer Software & Hardware 4,217 6,670 2,763 -58.58Electrical Equipment 2,432 900 2,724 202.67Hotel & Tourism 830 1,427 2,246 57.39Information & Broadcasting(including Print Media) 747 1,711 2,015 17.77Trading 2,108 2,427 1,982 -18.34Metallurgical Industries 1,909 3,420 1,485 -56.58Consultancy Services 606 825 1,341 62.55Sea Transport 363 127 1,293 918.11Petroleum & Natural Gas 234 947 1,084 14.47Chemicals (other than Fertilizers) 731 1,991 1,000 -49.77Grand Total of All FDI Flows

Source : Department of Industrial Policy and Promotion.

226 Economic Survey 2009-10making available drawback benefit simultaneouslywith refund of service tax paid for exports; makingpre- and post-shipment export credit for certainspecific sectors including textiles belonging to thesmall and medium sector more attractive with interestsubvention; additional allocation of Rs 1,400 croreto clear the entire backlog in TUFS; inclusion of allhandicrafts items under the Vishesh Krishi & GramUdyog Yojana (VKGUY); and boost to collateral-freelending.

9.61 The stimulus scheme announced on January2, 2009 included extension of the Duty EntitlementPassbook Scheme (DEPB) scheme till December31, 2009 and restoration of the rates to thoseprevailing prior to November 5, 2008 and increase inthe duty drawback rates on certain knitted fabricsand specified categories of yarn with retrospectiveeffect from September 1, 2008.

9.62 The Interim Budget 2009-10 announcedmeasures like reduction in general rate of Centralexcise duty from 10 per cent to 8 per cent, whichbenefited textile machinery and reduction in rate ofservice tax on taxable services from 12 per cent to10 per cent.

9.63 Highlights of the Trade Facilitation Measuresannounced under the Foreign Trade Policy (onFebruary 26, 2009), inter alia, included provision ofRs 325 crore under promotional schemes for leather,textiles, etc., for exports made with effect from April1, 2009; notification of the benefit of 5 per cent dutycredit script on free on board value of exports underthe Focus Product Scheme (FPS) for exports ofhandmade carpets, in lieu of the 3.5 per cent benefitallowed earlier under the VKGUY; inclusion oftechnical textiles under the High-Tech ProductsExport Promotion Scheme; announcement ofBhilwara in Rajasthan as the Town of ExportExcellence for Textiles; enabling recognizedassociation of units to access funds under the MarketAccess Initiative (MAI) scheme for creating focusedtechnological services; reduction in the threshold limitfor recognition as a premier trading house to Rs 7500crore from Rs 10,000 crore; proportionate reductionof the export obligation of a product under the ExportPromotion Capital Goods (EPCG) scheme, in caseof decline in exports of that product by more than 5per cent; extension of DEPB/duty credit scriptutilization for payment of duty on import of restricteditems; simplification of procedure for claiming dutydrawback refund and refund of terminal excise duty;allowing re-credit of 4 per cent special additional duty,in case of payment of duty by incentive scheme

scrips such as the VKGUY, Focus Product andFocus Market; and extension of the export obligationperiod against advance authorizations up to 36months.

9.64 On March 4, 2009, the Governmentannounced the facility of refund of service tax paidon all input services to special economic zone (SEZ)units and developers (which was earlier restricted toservices that were consumed within the zone).

9.65 The incentives introduced under the ForeignTrade Policy 2009–2014 included extension ofincentive schemes by addition of new products andmarkets; addition of 26 new markets under the FocusMarket Scheme (FMS); raising the incentive availableunder the FMS from 2.5 per cent to 3.0 per cent;raising the incentive available under the FPS from1.25 per cent to 2.0 per cent; expansion of the MarketLinked Focus Product Scheme (MLFPS); extensionof MLFPS benefits to export to additional marketsfor certain products; providing higher allocation forthe MDA and MAI schemes; introduction of theEPCG scheme at zero duty for apparels and textilesamong others; extension of the DEPB scheme tillDecember 31, 2010; and removal of the requirementof ‘Handloom Mark’ for availing of benefits under theFPS.

Chemicals and Petrochemicals9.66 The Assam Gas Cracker Project, approvedby the Government in April 2006 at a fixed cost ofRs.5,461 crore, with GAIL (India) Ltd. as the mainpromoter, is expected to generate substantialemployment and investments in downstream plastic-processing industries. The project is scheduled forcommissioning in April 2012. The financial closureof the project has been successfully completed inOctober 2009. The capital subsidy for the project isbeing released by the Government in the years from2007-08 to 2012-13. Of the Rs 429.1 crore cumulativeexpenditure on the project till October 2009, Rs 208crore has been released in 2009-10 (till October2009).

9.67 India, a signatory to the Chemical WeaponsConvention (CWC), has a fairly large chemicalindustry which falls under the ambit of the CWC.The Department of Chemicals and Petrochemicalshas so far successfully hosted 73 OPCW(Organization for the Prohibition of ChemicalWeapons) inspections including 13 in 2009-10. Helpdesks have been set up at Vadodara, Mumbai andChennai for facilitating compliance with CWCobligations. A sector-specific investment region,

227Industry‘Petroleum, Chemicals and PetrochemicalsInvestment Region’ (PCPIR) has been set up toensure adoption of a holistic approach to promotethe petroleum, chemicals and petrochemicals sectorsin an integrated and environment -friendly manner.The PCPIR region would be a combination ofproduction projects, public utilities, logistics,environmental protection, residential areas andadministrative services. Proposals have beenreceived from the Governments of Andhra Pradesh,Gujarat, Karnataka, Orissa, Tamil Nadu and WestBengal. The Andhra Pradesh, Gujarat and WestBengal proposals have been approved in February2009 and Memoranda of Agreement (MoA) signedbetween the Central Government and the three StateGovernments .

Pharmaceuticals9.68 In pursuit of excellence in pharmaceuticaleducation and research, six new National Institutesof Pharmaceutical Education & Research (NIPERs)have been set up, in addition to the existing one atMohali. These NIPERs will award masters anddoctoral degrees and encourage R&D activities. TheNIPERs have been set up in collaboration with mentorinstitutes so that advanced curricula and pedagogicalmethodologies are brought into practice for high-endteaching. Some of the new R&D initiatives in thesector include the launching of an educationprogramme for drug regulators and industry andpreparation of a Venture Finance and IncubationFund for innovative R&D.9.69 An Environmental Cell has been created inthe Department of Pharmaceuticals to collect anddisseminate information on pharma-relatedenvironmental matters, identify issues and solutions,create awareness on environmental issues andcoordinate with other stakeholders.9.70 The Department of Pharmaceuticals incollaboration with the Ministry of MSME hasintroduced a Scheme for Schedule ‘M’ Complianceby small-scale industrial (SSI) units in the pharmasector under the overall umbrella of the Credit LinkedSubsidy Scheme (CLCSS). Under the scheme,pharma SSI units are eligible for 15 per cent upfrontcapital subsidy on institutional finance up to Rs1.00crore availed of by them for adoption of improvedtechnology to make themselves Schedule ‘M’Compliant.9.71 Other new initiatives that have been taken /are being contemplated by the Department includethe launching of the access to affordable medicineJan Aushadhi Campaign, measures for setting up

world class pharma infrastructure in India throughpublic-private partnership (PPP) and providingimpetus for manufacturing of new medical devicesand pharma machinery.

Fertilizers9.72 The government has decided to examine thefeasibility of revival of the Hindustan FertilizerCorporation Ltd (HFCL) and Fertilizer Corporation ofIndia Ltd (FCIL), subject to confirmed availability ofgas. An Empowered Committee of Secretaries,constituted to look into the various financial modelsfor revival of the closed units, has recommended therevenue-sharing model (RSM) with an upfront fee forthe revival of each unit through the Build Own andOperate (BOO) mode. Action is being taken by therespective companies for finalization of a fully tiedup revival proposal for each unit. Revival of MadrasFertilizers Ltd (MFL), Fertilizers & ChemicalsTravancore Ltd (FACT) and Brahmaputra ValleyFertilizer Corporation Ltd (BVFCL) is also underconsideration.

9.73 The New Pricing Scheme-III (NPS-III) forindigenous urea seeks to rationalize distribution andmovement of urea and to lay down a definite plan forconversion of all non-gas-based urea units to gas.The Government has announced a new investmentpolicy for urea units to attract investment in thefertilizer sector that is based on import parity pricebenchmarking. Besides, a policy for encouragingproduction and availability of fortified and coatedfertilizers was notified.

9.74 To ensure easy availability of fertilizers in allparts of the country, a uniform freight subsidy policywas announced under which rail freight will be paidon actuals and road freight on a normative averagedistrict lead.

9.75 The Revised Concession Scheme fordecontrolled phosphatic and potassic fertilizers wasannounced, under which final rates for concession,to be worked out on a monthly basis, for indigenousDAP would be the same as those for imported DAP.Further, mono ammonium phosphate, triple superphosphate and ammonium sulphate have beenincluded in the concession scheme. The maximumretail price has been left open to be decided by themanufactures with effect from October 1, 2009. Anamount of Rs 2,000/MT has been allowed asconcession on Single Super Phosphate (SSP).

9.76 Possibilities for setting up of joint ventureammonia/urea projects in countries abroad where

228 Economic Survey 2009-10adequate gas is available, are being explored. Indianentities are in dialogue for joint ventures in the fieldof phosphatic and potassic fertilizers in countriessuch as Jordan, Moracco, Tunisia, Australia, Syriaand Canada.

Steel9.77 Responding to the changed scenario, theGovernment of India removed the export duty on allsteel items, reintroduced import duty of 5 per centon steel, restored DEPB benefits, reduced exciseduty to 8 per cent, placed imports of hot-rolled coilson the “restricted list”, making them available todirect users only and withdrew the exemption fromcountervailing duty on import of thermo-mechanicallytreated (TMT)bars and structurals. In recent times,to ensure adequate domestic availability, export dutyon iron lumps has been increased from 5 per cent to10 per cent and a 5 per cent export duty has beenimposed on iron ore fines to regulate exports of thematerial. Moreover, an Inter-Ministerial Group (IMG)has been set up to facilitate interaction betweeninvestors and the various agencies in matters ofacquisition of land, mining rights, power andtransportation including the rail, road and port sectors.

Electronics and information technology9.78 Approved in May 2006, there are 27 MissionMode Projects (MMPs) under the National e-Governance Plan (NeGP) consisting of 9 CentralMMPs, 11 State MMPs and 7 integrated MMPs(including 8 programme support components) which,inter alia, achieved the following by December 2009.Out of the 100,000 broadband Internet-enabledCommon Service Centres (CSCs) planned to berolled out in rural areas on PPP basis, 58,954 havebeen rolled out. Eleven States/ Union Territories havecompleted implementation of the State Wide AreaNetworks (SWANs) scheme which is envisaged toprovide secured network from State headquarters upto block level with a minimum bandwidth capacity of2 Mbps. Proposals of State Data Centres (SDC) for31 States/ Union Territories have been approved witha total outlay of Rs 1,378.50 crore. Twenty States/Union Territories have completed the institutionalframework for State-level strategic decision makingincluding setting up of State e-Governance MissionTeams (SeMT) and deployed SeMT personnel.

9.79 Under the initial phase of the NationalKnowledge Network (with scalable multi-gigabitcapabilities to connect 1,000 nodes covering alluniversities, research institutions, libraries,

laboratories, hospitals and agricultural institutionsacross the country), a core backbone consisting of15 Points of Presence (PoPs) has been establishedwith 2.5 Gbp capacity. Fifty-seven institutions ofhigher learning and advanced research have beenconnected to the network and six virtual classroomshave been set up at six IITs. Under the National SkillDevelopment Policy, a target has been laid down toskill 10 million people by the year 2022 in the areaof IT. The Information Technology Research Academyprogramme has been conceived for advancingcapacity and capability building in the area ofinformation and communication technology andelectronics.

9.80 Through the Nanotechnology Programme, R&Dcapacity and infrastructure is being built up at theIndian Institute of Science Bangalore and IIT Bombay.Application-oriented projects for specific users/industries with technology demonstration andtechnology transfers are mostly carried out by R&Dsocieties of the Department of InformationTechnology like the Centre for Development ofAdvanced Computing (CDAC) and Society for AppliedMicrowave Electronic Engineering and Research(SAMEER) with active collaboration from academics.C-DAC commissioned a high performance computingsystem called PARAM “Yuva”. The “PARAMSheersh” Supercomputing Facility at the NorthEastern Hill University (NEHU), Shillong conductsscientific and engineering research in strategicareas in the North-East region. The nationwidegrid-computing initiative, Garuda, aggregatessupercomputing and storage resources nationwide,provides a problem-solving environment, and enablescollaborative R&D for research and user community.Garuda connects 45 premier institutions across17 cities.

9.81 The Information Technology (Amendment) Act2008 has been enforced and rules of importantsections have been notified in October 2009addressing the needs of national cyber security. TheAct has, inter alia, added provisions to deal withnew forms of cyber crimes like publishing sexuallyexplicit material in electronic form, video voyeurismand breach of confidentiality. The Indian ComputerEmergency Response Team (CERT-In) has beendesignated as the nodal agency for coordinatingmatters related to cyber security and emergencyresponse. CERT-In has published a crisismanagement plan for countering cyber attacks andcyber terrorism. It has also created a panel of IT

229Industrysecurity auditors. The Certifying Authorities (CAs)licensed by the CCA have issued more than14,00,000 Digital Signature Certificates. These arebeing used in applications such as Real Time GrossSettlement System & Electronic Fund Transfer,email, e-procurement, share trading and issue ofimport/export licences and filing of companyreturns.

MSMEs9.82 In accordance with the provisions of theMSMED Act 2006, the MSMED (Furnishing ofInformation) Rules, 2009 were notified in October2009. These provide for furnishing of informationrelating to investment in plant and machinery orequipment by enterprises. Further, the AdvisoryCommittee, as provided in the MSMED Act has beenreconstituted in September 2009.

9.83 The National Manufacturing CompetitivenessProgramme (NMCP) has ten components targetedat enhancing the entire value chain of the MSMEsector. Of these, five were already under operation,which included Quality Management Standards(QMS) and Quality Technology Tools (QTT), buildingawareness on Intellectual Property Rights forMSMEs, Support for Entrepreneurial and ManagerialDevelopment of SMEs through Incubators, MarketingSupport Assistance to MSMEs and Mini-ToolRooms. During 2009-10, two more components havebeen made operational, namely, the LeanManufacturing Competitiveness Scheme for MSMEsand the Design Clinic Scheme. Of the remainingthree schemes, two–Technology and QualityUpgradation Support to MSMEs and the MarketingAssistance and Technology Upgradation Schemefor MSMEs–have been approved.

9.84 Skill development has been accorded highpriority in line with the overall target set by the PrimeMinister’s National Council on Skill Development.The agencies under the Ministry of MSME willconduct skill development programmes for about 3.62lakh trainees during 2009-10.

9.85 The cluster approach has been adopted as akey strategy for enhancing the productivity,competitiveness and capacity building of MSEs andtheir collectives. Under the MSE Cluster DevelopmentProgramme, 27 new clusters were taken up fordiagnostic study, 27 for soft interventions and 8 wereapproved for setting up of common facility centres(CFCs) during 2009-10. Cumulatively, 441 clustersin 28 States and 7 UTs have so far been taken up for

diagnostic study, soft interventions and setting up ofCFCs under the programme.

9.86 Under the Credit Guarantee Fund Scheme forMicro and Small Enterprises, over 1 lakh MSEproposals for an amount of Rs 4,465 crore have beenapproved for extending loans without collateral/third-party guarantee during April-December 2009,registering substantial growth over the previous year’slevels. Cumulatively, about 2.50 lakh MSE proposalsfor loans amounting to Rs9,200 crore havebeen approved under the scheme tillDecember 2009.

9.87 Under the Credit Linked Capital SubsidyScheme (CLCSS), which aims at facilitatingtechnology upgradation of the MSE sector, 1,403MSEs have been assisted and subsidy amountingto Rs 81.53 crore has been sanctioned during April-November 2009. Cumulatively, 7,910 MSEs havebeen assisted and subsidy amounting to Rs 344.84crore sanctioned till November 2009.

9.88 A loan agreement for $ 150 million was signedbetween the Government of India and the AsianDevelopment Bank in December 2009 forimplementing the comprehensive Khadi ReformProgramme, under which the khadi and villageindustries (KVI) sector is proposed to be revitalizedwith enhanced sustainability, income, employmentand artisan welfare.

9.89 Under the Prime Minister’s EmploymentGeneration Programme (PMEGP) launched inAugust 2008, cumulatively 4.56 lakh applicationshave been received by various implementing agenciesup to November 2009, of which 1.63 lakh have beenrecommended to banks. A total of 50,207 projectsinvolving margin money of Rs 833.86 crore have beensanctioned by the banks up to November 2009.

9.90 A new scheme, namely Strengthening ofInfrastructure of Existing Weak Khadi Institutionsand Assistance for Marketing Infrastructure, has beenintroduced, envisaging renovation of 30 selected khadisales outlets and providing assistance forstrengthening of infrastructure of 100 existing weakinstitutions.

9.91 The recent global economic slowdown hashad an adverse impact on the Indian economy,including the MSME sector. In this context, therepresentatives of 19 prominent MSME Associationsmet the Prime Minister on August 26, 2009 tohighlight various concerns and issues. The PrimeMinister announced the setting up of a Task Force

230 Economic Survey 2009-10to reflect on the issues and formulate an agenda foraction within a period of three months afterdiscussions with all stakeholders. Accordingly, aTask Force under the chairmanship of the PrincipalSecretary to the Prime Minister has been constitutedto address the issues of MSME sector. The TaskForce classified the common issues into followingmajor thematic areas (namely credit, marketing,labour, rehabilitation and exit policy, infrastructure,technology and skill development and taxation) andconstituted separate Sub-Groups for detailedexamination. A separate Sub-Group was constitutedto look into the development of MSMEs in the North-East and Jammu & Kashmir. The Task Forcesubmitted its report to Hon'ble Prime Minister onJanuary 30, 2010. The recommendations of the TaskForce have been made with a view to not only helpthe MSMEs in meeting the challenges of globaleconomic slowdown but will also facilitate theirgrowth and development.

CPSEs9.92 The Government has been delegatingenhanced financial and operational powers to theNavratna, Miniratna and other profit-making CPSEs.There are 18 Navratna enterprises. Six more CPSEs,namely the Airport Authority of India Limited, EnnorePort Ltd, Tehri Hydro Development Corporation,Security Printing and Minting Corporation Ltd, SatlujJal Vidut Nigam Ltd and Indian Railway Catering andTourism Corporation Ltd. were granted Miniratnastatus during the year, raising the total number ofMiniratna CPSEs to 62.

9.93 Besides endeavouring to professionalize theBoards of Directors of these enterprises, theGovernment has issued guidelines on corporategovernance of CPSEs. The Board for Reconstructionof Public Sector Enterprises (BRPSE), establishedto advise the Government, inter alia, on revival /restructuring of sick and loss-making CPSEs, maderecommendations on 58 cases until December 31,2009. The Government has approved proposals forthe revival of 37 CPSEs and closure of two. The totalassistance approved in this regard up to March 31,2009 was Rs 15,275 crore, which comprised Rs 2,935crore as cash assistance and Rs 12,340 crore asnon-cash assistance.

9.94 Nearly one-fourth of the employees in CPSEsare in the managerial and supervisory cadres. Thetotal number of employees in all CPSEs came downto 15.35 lakh (excluding casual and contract labour)as on March 31, 2009 compared to 15.66 lakh as on

March 31, 2008. The average per capita emolumentsin CPSEs stood at about Rs 5,45,500 per annum.

SOME CRITICAL DIMENSIONS OFINDUSTRIAL DEVELOPMENTIndustrial pollution and environment9.95 Industries, large, medium and small scale,have been a significant source of air and waterpollution. Out of 2,715 industries identified under the17 categories of highly polluting industries, 1,940have installed pollution control devices to complywith standards, 479 have been closed and legalaction has been taken against 296 defaulting units.Necessary measures – both preventive andpromotional – have been taken for control of industrialpollution. These, inter alia, include notification andenforcement of emission and effluent standards;setting up of clean technology mechanisms andeffluent treatment plants; establishment of wasteminimization circles in clusters of small-scaleindustries; regulation of location of industries;implementation of the charter on CorporateResponsibility for Environmental Protection (CREP)in the 17 highly polluting categories; introduction ofthe voluntary Eco Mark scheme; implementation ofan auto fuel policy that controls vehicular pollution;use of economic instruments to internalize cost ofpollution; and fiscal incentives for pollution controlequipments.

9.96 Air quality data (annual average) of designatedcities/towns reveal that the levels of sulphur dioxidewere within the National Ambient Air QualityStandards (NAAQS). The NAAQS of nitrogen oxidewas violated at 14 per cent of monitoring stations inindustrial areas. High levels of respirable suspendedparticulate matter were the more prevalent airpollutant. Similarly, based on the primary waterquality criteria evolved in terms of Bio-ChemicalOxygen demand (BOD), 150 stretches on 105 rivershave been identified as polluted.

9.97 Prior environmental clearance of developmentprojects based on impact assessment is mandatoryfor designated sectors/projects. Table 9.21 givesfigures for projects appraised in various sectors duringApril-November 2009.

9.98 The recent policy initiatives that havebeen taken by the Government to mitigate theimpact of environmental pollution include thefollowing.

231Industry

The Government has recently revised theNAAQS and limits for 12 pollutants havebeen notified. Area classification based onland use has been done away with so thatthere are uniform ambient air quality normsfor residential and industrial areas. Therevised standards are based on global bestpractices and local Indian conditions.Towards a revamped river conservationstrategy, the Government has accorded theGanga the status of a “national river” andhas constituted a National Ganga RiverBasin Authority (NGRBA) to ensure effectiveabatement of pollution and conservation ofthe river. The NGRBA has resolved that bythe year 2020, no untreated municipalsewage or industrial effluent will flow intothe Ganga.The Environment Impact Assessment (EIA)Notification 2006 has been amended inDecember 2009. The amendments madeinter alia include decision of the State LevelEnvironment Impact Assessment Authority(SEIAA) to be taken by majority; coal-mineprojects with lease area up to 150 ha to beappraised by the SEIAA; biomass-basedpower plants up to 15 MW and power plantsbased on non-hazardous municipal solidwastes have been exempted from EIAnotification; and information regarding grantof environmental clearance to be put in thepublic domain for Category ‘A’ projects.A National Green Tribunal has beenproposed for expeditious disposal of casesrelating to environmental protection andconservation of forests and other naturalresources including enforcement of anylegal right relating to environment and giving

relief and compensation for damages. Theproposal to set up a National EnvironmentProtection Authority to strengthencompliance and enforcement ofenvironmental statutes and to improveenvironmental planning and management isin a conceptual stage.

Labour relations9.99 The current year, reckoned by the number ofman days lost because of strikes and lockouts, hasso far been a good year. The number of man dayslost because of lockouts has continuously been onthe decline (Table 9.22). In regard to the spatialdispersion of the incidences of strikes and lockouts,it is observed that Gujarat, Andhra Pradesh, Keralaand Rajasthan are the most affected States. Amongsectors, financial intermediaries (excluding insurance& pension funds) recorded the maximum number ofstrikes and lockouts.

Table 9.21 : Projects appraised during April-November 2009

Nature of Project Cleared Pending Rejected/ Returned/withdrawn

EC TOR EC TOR EC TOR

1. Industry 296 284 67 144 282. Thermal Power 26 50 29 37 123. River Valley and Hydroelectric 09 28 09 13 024. Mining (Coal & Non-coal) 97 171 85 68 715. Infrastructure and Miscellaneous 68 35 47 05 026. Construction & Industrial Estates 46 04 17 03 01

Total 542 572 254 270 116

Source : Ministry of Environment and ForestsEC – Environmental clearance; TOR - Terms of Reference

Table 9.22 : Strikes and lockouts(Man-days lost, in million)

Year Strikes LockoutsNumber Man- Number Man-

days dayslost lost

2004 236 4.83 241 19.04

2005 227 10.81 229 18.86

2006 243 5.32 187 15.01

2007 210 15.06 179 12.11

2008 (P) 250 7.02 182 10.46

2009(P) 91 2.05 31 0.84(Jan-Nov.)

Source : Labour Bureau, ShimlaNote : P - Provisional


CHALLENGES AND OUTLOOK9.100 The cyclical slowdown in the industrial sectorthat began in 2007-08 got compounded by the twinglobal shocks in 2008-09. The effects lingered onbriefly in the current fiscal; but growth rebound isamply evident. Given the size of the Indian marketand the unmet demand for industrial products,coupled with the fact that the overall GDP has startedto exhibit growth momentum, there is reasonablehope that demand would not by itself be aconstraining factor. Besides, despite the significantstep-up in the Government borrowing programme,domestic financial market and external resource flowshave given the impression that raising investibleresources would not be a major problem. All thesefactors, combined with the inherent strength ofindustrial corporates exemplified by the resilienceshown by them against adversities in the recent pastbrighten the industrial outlook in the medium term.

9.101 The emerging investment picture is yet tobecome clear. Growth in the production of capitalgoods is improving, but different components of the“capital goods” group have shown a mixed pictureduring the current year so far. In any case, growth inthe indigenous production of capital goods cannotby itself be used to comment on investment andcapacity expansion, because, there has, of late, beensignificant growth in imported capacity addition.

9.102 Industry-agriculture linkages are well knownin the Indian context. It appears that there is alreadysome spill over of the slowdown in the agriculturesector affecting some segments of industry. Whilethe ongoing industrial recovery is observed to bebroad-based, it should also be noted that some ofthe sectors that failed to revive in the current year,like food products, paper products, leather products,

jute and cotton textiles and metal products (to anextent), are labour intensive. Ensuring balanced andsustained growth of the Indian economy is predicated,to a great extent, on the ability of manufacturing toabsorb the vast surplus labour in the farm sector.Apart from the need for sustaining the high growth inlabour-intensive sectors with the vast pool of talentavailable within the country, another critical challengein this respect would be to erase the skill deficit witha multi-faceted programme for skill upgradation.

9.103 Manufacturing inflation, especially of pricesof industrial inputs, remained mild in the current year.It has predominantly remained an inflation story offood products, which may have partly spilled overfrom the slowdown in the farm sector. Theimprovement in the cost structure of manufacturingcompanies seems to have catalysed the process ofrecovery. However, indications are that despite theprice levels of food products remaining firm, theircontribution to manufacturing inflation has beencoming down, suggesting a slightly moredecentralized movement in manufacturing prices.While higher prices are an incentive to the producer,they also have implications for the cost structureand the demand for manufactured products. Thistrade-off needs to be carefully managed.

9.104 Capacity addition in some of the keyinfrastructure sectors like power and roads is lagging;however, it is expected that with the completion ofthe large number of projects in progress, the targetswould be achieved. One of the biggest challenges tosustaining and stepping up industrial growth lies inremoving the infrastructural impediments. Growth ininfrastructure not only alleviates the supply-sideconstraints in industrial production, but alsostimulates additional domestic demand required forindustrial growth.

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Industry - Union Budget · 2011. 6. 21. · Industry 209 0 Mining Per cent Growth (per cent) in the IIP and its major components 5 10 15 20 Growth in Apr-Nov 08-5 Figure 9.1 25 Growth